Colombian bankers propose reducing reserve requirements

Reuters Staff

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BOGOTA, Oct 2 (Reuters) - Colombia’s largest banking association proposed on Monday a reduction in reserve requirements, in a bid to spur a decline in interest rates and incentivize credit amid a fall in economic growth.

Reserve requirements are the minimum amount of reserves commercial banks must hold and are usually overseen by central banks.

The proposed reduction for current accounts to 4 percent from 11 percent and for temporary accounts that expire in less than 18 months to 4 percent from 4.5 percent could free up some 9.58 trillion pesos ($3.26 million), said the Banking and Financial Institutions Association, called Asobancaria in Spanish.

The burden of reserve requirements is passed to consumers via interest rates, Asobancaria said in a statement, and a reduction in reserves would not affect the availability of liquidity.

On Friday, Colombia’s central bank held its benchmark interest rate steady for the first time in seven months, as policymakers paused to gauge how much inflation was slowing and whether the economy needed more support. (Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Peter Cooney)